How American Express is navigating the COVID-19 pandemic

In the last pandemic-ridden months, more than 90 percent of payment volumes recorded by American Express India stemmed from a surge in online shopping. And those numbers are likely to increase for all digital payment companies — not just AmEx — and as ecommerce becomes the way of life for everyone, including lower-tier cities.

Most fintech evangelists in India have credited demonetisation for increasing the adoption of online wallets and payment services, but they’re all dancing to a different tune now. COVID-19 has fast-tracked the evolution and adoption of technology in India by at least four years, experts have said - and so it is in the fintech space.

“There was always a little bit of concern about online shopping regarding safety and security of entering one’s personal, financial details. But COVID-19 has changed that,” Manoj Adlakha, CEO of American Express Banking Corp, India, tells YourStory in an interview.

But this paradigm shift in consumer behaviour where more and more people are choosing to shop online than visit a physical store is not just limited to online purchases — utility bills, insurance premiums, school and tuition fees, and health and fitness spends are all being put on credit cards, Manoj says, which indicates that users are discovering and understanding these online finance products better now than ever before.

It’s safe to infer that the fintech industry, as a whole, is showing signs of maturation that it hadn’t pre-COVID-19.

The pandemic has clearly proven that digital financial services are here to stay, and their ever-expanding scope is finally being understood by people. India is very underpenetrated in terms of fintech, so there’s ample room to not just grow, but for newer ventures to thrive, Manoj says.

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Beyond premium and exclusivity

The American Express Centurion Card — better known as the AmEx Black Card — is more than just your ordinary, run-of-the-mill credit card. It’s a status symbol very few in the world can boast about. For the Beyonces and Kim Kardashians of the world, AmEx symbolises a premium, exclusive club that includes billionaires and people who don’t have to worry about interest rates or APRs.

But over the past couple of years, AmEx has been trying to rid itself of that image — to an extent — and cater to a larger user group as it looks to remain competitive in a space now dominated by new-age fintech companies that no longer even need a physical card anymore to extend credit card-like services. 

To that end, AmEx has partnered with SMEs, MSMEs, young innovators, and financial technology companies, among others, and launched services that more and more people can take advantage of.

Millennials, for example, have currently captured fintechs’ attention as their tech know-how, coupled with increasing financial literacy, make them easy customers. Add to that equation the fact that millennials are more likely to remain loyal to companies as they grow, and the segment turns into a gift that keeps giving.

“70 percent of India today is millennials, and they account for 47 percent of the total workforce. AmEx is keen to tap that populace and we’ve tailored cards and services that are specifically targeted towards millennials. Our thinking is that once we get them on board, they’re more likely to stick with us as they move up in the world and the value chain,” Manoj says.

If these were normal days, AmEx’s move to go after a new user group might have just been another way for the New York-headquartered company to grow its bottom-line. But with COVID-19 accelerating the rate of adoption of digital payment services, so many fintechs eyeing the same set of users, and, at the same time, spending decreasing in certain pockets traditionally huge for the company, AmEx is having to increasingly open its gates to more and more people.

The company, shortly after reporting underwhelming third-quarter results, flagged an even more abysmal outlook saying it does not expect business travel spending to recover before early 2022. American Express said its reduction in operating expenses will be "somewhat less" than the $1 billion it had outlined earlier, and added that it would instead spend heavily to add new card customers.

In India too, where AmEx is not as widely used as in the US, Manoj says he’s singularly focussed on expanding the user base.

“We’re aggressively targeting more and more customers, and we want to add on a significantly new number of merchants; We’re also constantly engaging with customers via cashbacks and other incentives because we want them to take the card out of the wallet,” Manoj says.

To boost retail spending, which was a bright spot in the company’s third-quarter results, AmEx says it is offering increased cashbacks, discounts and points.

“We’re looking for ways to strengthen our reward programme on an ongoing basis, and also making sure our customer service is par excellence,” Manoj says.